U.S. Steel (NYSE:X) has been having a rough time of late, battling a decline in demand from European customers as well as a potential decline in domestic sales. With little exposure to the developing regions that are driving industry growth, it is essential that the company safeguard its interests in its existing markets. The U.S. Department of Commerce (DOC) has officially initiated anti-dumping investigations on imports of welded carbon steel pipes from India, Oman, UAE and Vietnam. We take a look at the potential impact on U.S. Steel’s shipments in case an anti dumping duty is imposed on the imports.  U.S. Steel, manufacturer of flat rolled and tubular steel, competes with international steel companies like ArcelorMittal (NYSE:MT) in the American and European markets.
Alleged Dumping Has Pressured Domestic Pricing
Dumping is a practice whereby an exporter prices a good below the price it charges in its own market, generally in order to force domestic competition out of the foreign market. Steel manufacturers in the U.S. filed a petition demanding that an anti-dumping duty be levied on these cheap steel imports from the aforementioned nations in order to safeguard their interests. The DOC may issue the primary determination on the anti-dumping and countervailing duty by January 12, 2011, which will eventually be implemented by June 25 2012. Since this is not just an anti-dumping duty, but also a countervailing duty that is levied to offset the excessive imports, it will become all the more difficult for the importers to price their products competitively.
These duties are an important way that a country can safeguard national producers, including the jobs of their employees from the cheap imports that eat away domestic market share. The anti dumping regulations would give U.S. Steel a much needed boost to market and price its products competitively. We previously discussed how its limited presence in only the U.S. and European market is troubling the company. We estimate that this could result in a 10-15 percent upside to tubular products shipments by the company in the U.S., adding approximately 3 billion in revenues.
With oil and natural gas producers looking to expand their operations from shale deposits, demand for tubular steel will continue to rise over the next few years. Therefore for U.S. Steel, a company that derives more than 37 percent of its value from tubular steel sold in U.S., these regulations could not have come at a better time.Notes: